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MANUFACTURING
GEORGIAN NATIONAL INVESTMENT AGENCY
2016
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Daguestan
ek
RUSSIA
Ter
Soulak
GEORGIA - COUNTRY OVERVIEW
Sokhumi
Mestia
Zugdidi
Gudauri
BLACK Anaklia Senaki Kutaisi
Tskhinvali
Poti Rioni
SEA Mtkvari
Kobuleti GEORGIA Gori
Batumi Telavi
Goderdzi Bakuriani
Gonio Akhaltsikhe TBILISI
Akhalkalaki
TURKEY
ARMENIA AZERBAIJAN
GEORGIA
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■■ Growing regional market - Companies operating in Georgia can benefit from the growing regional
market and various regional import substitution opportunities
■■ Access to 900 million markets without Customs Duty - Georgia has Free Trade Agreements (FTA) with
Turkey and post-soviet countries, and Deep and Comprehensive Free Trade Agreement (DCFTA) with EU
blue-collar workers
Anaklia FIZ FIZ
OPPORTUNITIES:
■■ Large import overhang on goods that are not usually traded extensively between the countries,
provides regional import substitution potential in food processing, paints and coatings, construction
materials, washing and polishing preparations, household goods etc.
■■ Georgia’s current advantages in terms of handling large transshipment flows, business stability, low
cost of power generation, existing raw materials and intermediate products provide opportunities for
large industrial projects, such as production of iron, aluminum and steel products.
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PREFERENTIAL TRADE REGIMES
■■ Free Trade Agreement (FTA) with Turkey and CIS ■■ Very simple and service oriented customs
countries (Russia, Ukraine, Kazakhstan etc.) policy and administration – customs
■■ Deep and Comprehensive Free Trade clearance in 15 minutes
Agreement (DCFTA) with EU was singed on
June 27, 2014 ■■ 80% of goods are free from import tariffs
■■ Generalized System of Preferences (GSP)
■■ No quantitative restrictions
agreement with USA, Norway, Switzerland,
Canada, Japan
■■ Member of WTO
GEORGIA
FREE TRADE
AGREEMENTS WITH
900 MILLION MARKETS
AND ACCESS WITHOUT
CUSTOMS DUTY
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UTILITY COSTS
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YOUNG, SKILLED AND COMPETITIVELY PRICED
LABOR FORCE
■■ Average monthly salary in manufacturing industry
COMPETITIVE LABOR amounts to USD 355 (2015) including white and blue-
collar workers, as well as C-suite employees
COSTS
■■ According to Heritage Foundation, Georgia ranks 26th
globally on Labor Freedom Index
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■■ Georgia has 72 higher educational institutions and over 100 professional education centers
Medical Education
■■ According to KPMG Research and Analysis:
VOCATIONAL EDUCATION
√√ Around 60% of young population and Bachelor’s Degree AND TRAINING
40% of overall population know English Intermediate
Qualification
V Level of VET
√√ Vast majority of the population have
some knowledge of Russian IV Level of VET
Pre-school Education
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MANUFACTURING SECTOR
▪ Mineral waters & soft drinks (133) ▪ Nuts (183) ▪ IDS Borjomi Georgia
Food & ▪ Wine (101) ▪ Wine (181) ▪ Coca-Cola Bottlers
beverages 515 1756 ▪ Bread, fresh pastry goods and ▪ Mineral waters & soft drinks Georgia
cakes (46) (166) ▪ Agara company
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MANUFACTURING SECTOR
40%
Non-metallic
35,3% mineral
products
30% Rubber and
Plastics 28,4%
26,2%
23,5% Machinery,
Chemicals Food &
20% Equipment &
Others beverages
15,6% 14,5%
Textile, Apparel
10% & Leather
10,2% Wood &
Paper
0%
0 50
50 100
100 -2,2% 150
150 250
200 500
250
Metals
-10%
-20%
Transport
-24,7% equipment
-30%
The food and non-metallic mineral products industries provide the largest industrial base for Georgia,
while non-metallic mineral products, chemicals and food are the fastest growing industries
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SEVERAL HIGHLY ATTRACTIVE REGIONAL PRODUCTION
OPPORTUNITIES
CHEMICALS
■■ Paints, varnishes and other coatings
■■ Washing, cleaning and polishing preparations
■■ Nitrogen fertilizers
■■ Perfumery and cosmetics
PLASTICS
■■ Packaging materials
■■ Tubes, pipes and hoses
■■ Other articles of plastics
CONSTRUCTION MATERIALS
■■ Articles of stone, plaster, cement, asbestos,
concrete and similar materials
■■ Glass fibres and articles thereof
OTHER SECTORS
■■ Ceramic products - tiles, sanitary ware,
refractory bricks
■■ Glass - windows and glassware
■■ Furniture
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NITROGEN FERTILIZERS
OVERVIEW POTENTIAL FOR GEORGIA
■■ In 2014, Georgia exported nitrogenous ■■ There is a high level of consumption and import in the
fertilizers (USD 138 million) to Poland, neighboring countries and wider region
Bulgaria, Armenia, India, USA, Greece, ■■ Considering the South Caucasus Pipeline (SCP) and
France etc. Georgia was the only exporter The North South Main Gas Pipeline (NSMGP), natural
from South Caucasus gas, important input for nitrogen fertilizer, can be easily
obtained from neighboring countries Azerbaijan and
■■ Demand and import of nitrogen fertilizers
are increasing in neighboring and EU Russia
countries - In 2014, total volume of import
of nitrogen fertilizers in the EU countries, INVESTMENT PROPOSAL
Turkey, Ukraine, Russia, Southern Caucasus ■■ Optimal capacity of the production: 150 000 - 200 000
and Central Asia was USD 9,564 million tons per year
■■ Among the target markets, except for ■■ IRR : 15.05 %
the EU countries, Turkey has especially ■■ Approximate investment amount: USD 119 -159 million
significant gap (USD 959 million in 2014) ■■ Financial calculations are based on KPMG sector
between the import and export. In research and investment proposal. Full version of the
2014 trade deficit in South Caucasus report is available
accounted USD 58 million
1%
1%
1%
Turkey
3%
3% France
Ukraine 21% 21%
5%
Germany
Kazakhstan
United Kingdom
13% Kyrgyzstan 3% Belgium
USD 1, 376 Million Azerbaijan 3% USD 8, 189 Million
Spain
14%
4%
Armenia Italy
4%
72%
Turkmenistan 5% Ireland
10%
Russian Federation 8%
7% Netherlands
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PAINTS, VARNISHES AND OTHER COATINGS
OVERVIEW POTENTIAL FOR GEORGIA
■■ Paint, varnish and other coating is one of ■■ Investment in the sector is attractive due to the significant
the fastest growing industry globally, mainly size of local and regional consumption and import
due to the huge demand in the construction ■■ The production levels in the close region and in Georgia
industry are not high, which creates place for a new producer to
■■ Europe is the second largest paint, varnish enter the market
and other coatings consumer taking 24% of ■■ There is high availability of raw materials in the region
the world volume and 29% of the world value
in 2013 INVESTMENT PROPOSAL
■■ Faster growth rates are forecasted for Turkey ■■ Optimal capacity of the production per year: paint and
and other Eastern European countries varnish – 15 000 tons; pigment and other coloring matter
– 12 000 - 13 000 tons; inks – 2000 – 3000 tons
■■ In 2014, South Caucasus countries imported
USD 107 Million of paint, varnish and other ■■ IRR: paint and varnish – 34.3%; pigment and other
coloring matter – 15%; inks – 23%
coatings
■■ Approximate investment amount: paint and varnish –
■■ Global sales of paint, varnish and other USD 10.1 mln; Pigment and other coloring matter – USD
coating increased by 3.9% In 2014, 19.3 - 20.9 mln; Inks – USD 2.6 - 3.9 mln
comprising about USD 132.3 billion (43.38
■■ Financial calculations are based on KPMG sector
million tons). The forecasted average annual research and investment proposal. Full version of the
growth for paint and varnish industry is 5% report is available
rate up to 2018
PAINT, VARNISH AND OTHER COATING SALES AND PAINT, VARNISH AND OTHER COATING CONSUMPTION
GROWTH RATE, 2011-2014 PER REGION IN 2013
150 15,0%
100 10,0%
6,3%
50 6,1% 5,0% Sales value 38% 29% 20% 8% 5%
3,9%
GLAZIERS PUTTY, GRAFTING PUTTY, RESIN CEMENTS AND GLAZIERS PUTTY, GRAFTING PUTTY, RESIN CEMENTS
PAINTERS FILLINGS WORLD IMPORT AND GROWTH RATE, AND PAINTERS FILLINGS IMPORT/EXPORT GAP IN
2010-2014 TARGET COUNTRIES, 2014
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165 167
Billion USD
USD Million
55 59
200 60
44
150 37
40
100
20
50
0 0
2010 2011 2012 2013 2014 2010 2011 2012 2013 2014
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PLASTICS MANUFACTURING
OVERVIEW POTENTIAL FOR GEORGIA
■■ Domestic consumption of plastic products was ■■ Considering the growing target market and
approximately USD 396 million in 2014 from which high level of import not only in Georgia, but in
only 32% was covered by domestic production other South Caucasus countries as well, there is a
■■ Georgia imports plastic products mainly from Turkey significant opportunity
(USD 157 million), China (USD 30 million) and Iran ■■ Raw materials can be easily obtained from Iran,
(USD (13 million) Azerbaijan and other nearby countries
■■ In 2014 export of plastic products from Georgia
accounted 15 Million INVESTMENT PROPOSAL
■■ Transportation cost of plastics, especially packaging
materials is very high compared to total product ■■ Opportunity to invest in manufacturing of plastic
price and for that reason these materials are not packaging materials such as closures, stoppers,
usually traded extensively between the countries. lids, caps etc. The initial production capacity
However in 2014 import of plastics amounted to could be 6,500 tons which will substitute 30% of
USD 286 million in Georgia import quantity
■■ In 2014 Georgia imported USD 9.3 Million High- ■■ Construction of a High-density polyethylene
Density Polyethylene Pipes (HDPE) and the import (HDPE) factory with production capacity of
has increased by by CAGR of 25% since 2005. 4,200 tons per year. The optimal initial investment
Azerbaijan (CAGR 17%) and Armenia (CAGR 27%) amount is USD 6 Million
imported a total of USD 5.3 Million HDPEs
350 748
800
286 655 656
300 267 700 649
253
250 230 600
USD Million
USD Million
500 460
200 171
400
150
300
100 200
50 100
0
0
2010 2011 2012 2013 2014
2010 2011 2012 2013 2014
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APPAREL AND TEXTILE
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CONSTRUCTION MATERIALS
OVERVIEW INVESTMENT PROPOSAL FOR GEORGIA
■■ South Caucasus countries are developing ■■ There are nine marble mines in Georgia, holding
with fast pace and demand for construction 24.5 million m3 reserves. The availability of raw
materials enables production capacity of 8 800
materials is growing yearly
tons per year to substitute import and create
■■ Global imports of worked Marble, Travertine export potential mainly to neighbor countries. The
and Alabaster amounted to 1.9 Billion USD in optimal initial investment is USD 3.5 Million
2014. Georgia imported 2 Million USD of these ■■ Georgia has ceramic tiles production capacity
products in 2014 and import grew by CAGR of of 132 000 tones per year thanks to clay deposits.
Domestic production has a potential to replace
21% since 2010
40% of imports and the remaining can be
■■ Georgia imported 54.3 million USD ceramic exported to Armenia and Azerbaijan. The optimal
tiles in 2014, while Azerbaijan and Armenia initial investment is USD 5.5 Million
imported 33 and 17 million USD respectively ■■ Additionally, Georgia has a good opportunity
for production of refractory bricks, which has the
■■ Glass wool insulation is one of the most widely robust import growth rate in South Caucasus.
used forms of insulation. The total value of Georgia has 36.4 million tons reserves of fireproof
import in Georgia, Armenia, Azerbaijan and clay, the main raw material for the production.
Kazakhstan amounted to 12 million USD in 2014 The optimal initial investment is USD 3 Million
with 35% CAGR and 15% CAGR for Georgia ■■ Georgia has several mines of glass sand, the
and Kazakhstan respectively main raw material for glass wool production, with
the total reserves of 132.9 million m3. The optimal
■■ Georgia has construction materials and facing initial investment is USD 6 Million for production
stones small and medium sized deposits, 312 capacity of 2 000 tons per year
and 107 respectively
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OPPORTUNITIES ARISING FROM GEORGIA’S TRANS-SHIPMENT
FLOWS AND RESOURCES
COPPER OVERVIEW
■■ Georgia and Armenia export copper ores, copper waste
and scrap
■■ Trade deficit of copper products (alloys and final products
e.g. wire, tubes, pipes) amounts to USD ~50 mln in the
South Caucasus countries
POTENTIAL FOR GEORGIA
■■ Potential for the production of copper alloys and end
products (copper wires, tubes etc.) for regional import
substitution
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OVERVIEW
■■ Georgia mines manganese and copper ores
■■ Georgia and neighboring countries export waste and scrap metals
■■ Georgia produces ferro alloys, largely for export (USD ~195 mln)
■■ Georgia (USD ~290 mln) and neighboring countries import large quantity of semi-finished and
finished iron and steel products
■■ Currently there are 4 big smelters in Georgia
■■ Standard cost for 1 kWh is 6 USD cents for 30-110 kV high voltage electricity
■■ Factories consuming more than 1 million kWh per year (1 kWh per year from 2017) can purchase
electricity directly from energy producers and negotiate on prices
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INCENTIVES AND ACCESS TO FINANCE
PRODUCE IN GEORGIA
Mission: supporting of manufacture and agriculture industries
Government offers:
■ Subsidies for loan interest payment
■ Free lands/buildings for factory construction
PARTNERSHIP FUND
■ 100% state owned investment fund
■ Operating fields: Energy, Hospitality & Real Estate, Manufacturing, Agribusiness
■ Finances up to 49% of equity in new investment projects
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OUR SERVICES
GNIA
LOCAL
INFORMATION COMPANIES
General data, statistics, sector researches GOVERNMENT
COMMUNICATION
Access to Government at all levels/Local partners
ORGANIZATION
Organization of site visits & accompanying of investors
AFTERCARE
Legal advising & Supporting services
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GEORGIAN NATIONAL INVESTMENT AGENCY 2016
Contact Person: Mr. Bachana Shengelia
E-mail: bshengelia@investingeorgia.org
Tel: +995 322 473 696 (107)
WWW.INVESTINGEORGIA.ORG
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